The latest entry in the debate about which generation has had it worst comes in the form of a new analysis that asks: Was it easier for boomers or millennials to buy a house as young adults?
The answer reached by economists at the real estate firm Redfin is that millennials (born between 1981 and 1996) started their 20s and 30s with much better prospects than their boomer predecessors (born between 1946 and 1964). Millennials at that age enjoyed far lower interest rates and higher household incomes.
But as older millennials reached their mid- to late 30s, the math flipped. After home prices and then interest rates spiked in recent years, millennials found themselves facing far higher mortgage payments than boomers did at a similar stage in life.
“The pandemic really changed everything,” said Chen Zhao, Redfin’s head of economic research and a 41-year-old millennial. Zhao said people from her generation who bought before the pandemic fared well. Those hoping to become homeowners afterward have faced a tougher economic climate.
Rather than graphing prices by year, the Redfin analysis tracked the mortgage payment someone hypothetically would have if they bought a median-priced home in the year that they were a certain age, such as 35. For all millennials who’ve already reached that age (the youngest are still 29 now) and for all boomers, the economists came up with the average payment they would have had in those years.
The post-pandemic interest rate spike clearly shows up when the older portion of millennials were in their late 30s.
Of course, rising home prices and interest rates have affected all generations. But many Gen Xers were already homeowners in their 50s when payments spiked; unless they moved post-pandemic, they could hold on to their low-rate mortgages.
Almost no Gen Z households, by contrast, had any chance to buy earlier when payments were low.
The differences between the generations are far larger than any one graph can show.
Millennials’ higher household income in their 20s and 30s compared with the money boomers made at the same ages can in part be attributed to the rising number of two-career households, which also means millennial parents must pay high child care costs that were less common for boomer parents. Millennials at the same ages are also paying more in student loans than their parents or grandparents generally were.
And when it comes to housing, the Redfin analysis focuses on what it takes to buy a median-priced home — not necessarily what first-time home buyers want to buy. For boomers buying in the ’70s, ’80s or ’90s, Zhao said: “There was a lot of starter home inventory. You don’t have to buy a median-price home. You can buy something cheaper.” Today, after decades of homes becoming larger, a classic starter home is hard to find, putting millennial first-time buyers on tough footing.
Still, Zhao surmised that much of the sense among millennials that their parents had it better back in the day comes from what happened in the years afterward, not from an accurate sense of their parents’ experience when they were just starting out.
Boomers bought at a time when interest rates were very high — rates soared as high as 18.6 percent in the early ‘80s and almost never dipped below 7 percent for a 30-year stretch from mid-1971 to 2001 — but house prices relative to income were much lower. Then came more than two decades of low rates, giving boomers ample opportunity to refinance the loans they took out on their relatively low-priced homes.
“Boomers bought when prices were low and rates were high. Millennials are buying when rates are comparatively lower but prices are much higher,” Zhao said. “Over that 40-year period after boomers bought, rates just kept coming down. [But] if you buy at a high price, you can’t refinance the price of your home. … Since we know what happened to the boomers after they bought, millennials feel like they got a worse deal.”
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